When it comes to capital preservation, few resources have been able to hold their value like gold. In the early part of this century gold remained quite stable. However, in 1971 Richard Nixon fully demonetized gold, detaching Federal Reserve notes (U.S. Dollars) from exchange at the predetermined price of gold. Money today is created by a privately owned central banking cartel. All U.S. citizens are forced to accept these fiat paper notes a payment for all debts, public and private, as a result of current legal tender laws.

Under the original agreement, these fed notes would always be exchangeable for gold and silver coin non bearer demand. From 1913 through 1933, Federal Reserve Bank branches would take gold on deposit from U.S. Citizens and issue in return Gold Certificates that could then be used in commerce. Profiting by collecting interest, banks lent the gold back to the public, keeping a fraction on hand in case some depositors wanted their gold back. Consumers would take gold on loan for tangible purchases beyond their current means. Upon purchase, the gold would transfer from buyer to seller and then get re-deposited, giving the banks repeated opportunities to loan us the same Gold.After several loans and deposits this pyramid scheme, called fractional reserve banking, would, on paper, turn one ounce of gold into several, leaving only a small amount of real gold for depositors.

Having the newly established power to lower reserve requirements, the Fed was able to fuel the largest economic expansions of all times: The Roaring 20s! Economic growth through the expansion of credit. What a party it was! Unfortunately, along with credit comes compounding interest. Member banks divested themselves from the exuberant market, raised reserve requirements and their greed ultimately caused the greatest depression of all times. A panic in the banking community was underhand! Depositors were demanding their gold back! Having only a fraction of the gold to disburse, bankers turned to their political friends and asked to be bailed out. Franklin D. Roosevelt responded with one of the largest defaults ever pulled on the U.S. public!

Government is the only agency that can take a valuable commodity like paper, slap some ink on it, and make it totally worthless. –Ludwig von Mises

On March 4 1933, (the day he was inaugurated) more than 12,000,000 people were out of work; 8,000 banks had failed, the U.S dollar (and almost every other currency in the world) was in trouble because people were losing confidence in paper currency. In fact, panicked people were draining all banks of much needed currency and people were hoarding gold and silver.

On March 6, he ordered every bank in the nation closed and prohibited banks from paying out withdrawals in gold or dealing in foreign exchange. On April 5, he issued Executive Order No, 6102 which stated in Section 2: “All persons are hereby required to deliver on or before May 1, 1933, to a Federal Reserve Bank or branch all Gold coin, mold bullion and mold certificates now owned by them.”

Americans had less than a month to comply and received only $20.67 per ounce in fiat paper money and silver coin for their gold. Violation of the order was punishable by up to a $10,000.00 fine and/or up to 10 years in prison, plus confiscation of gold forfeited to the government.

However, Roosevelt knew he’d have trouble if he tried to confiscate all gold coins, especially those held by people for historical, cultural, or collector reasons. The hang up was the Fifth Amendment to the U.S. Constitution, specifically the Eminent Domain Clause, which states, “…nor shall private property be taken (by the government) without just compensation”.This meant the government would have to take every “collector coin” on a case by case basis to determine “just compensation” for all rare and unusual coin–an almost unfeasible task.

Realizing this, Roosevelt deliberately excluded all “gold coins having a recognized special value to collectors of rare and unusual coins” “from his executive order, figuring they would amount nothing more than a drop in the bucket relatively speaking. In June 1933, Congress, at the urging of Roosevelt, passed a joint resolution rescinding the use of gold clauses in all past and future contracts. This meant all contractual obligations had to be met with fiat paper currency. Gold no longer was king!

On January 15, 1934, Congress then passed the Gold Reserve Act which authorized all gold to be owned by the government as a precious metals base for its currency. This Gold Reserve Act also gave Roosevelt the power to devalue the U.S. dollar by raising the price of gold. So Roosevelt immediately raised the base price from (approximately) $20.67 per ounce to $35.00 per ounce, where it remained until 1971. In reality the price of gold did not almost double overnight—the value of the U.S. dollar fell by 59%. The ‘phraseology of his exemption becomes very important to us today as we contemplate what the current administration might be considering to help solve its own financial problems. Roosevelt exempt from the surrender requirement not the “owners, “holders,” nor “possessors,” nor even “investors” of such coins. Exemption was granted to just one classification:” “collectors” (for 5th amendment reasons discussed earlier). Keep in mind there is a clear distinction between “collectors” and “investors,” of rare coins. A collector’s primary interest in rare coins is enjoyment—it’s for historical, aesthetic or cultural attraction, whereas the investor’s interest is only financial to make a profit. It is clear Roosevelt intended to exclude only the collector. In a possible future confiscation collector gold coins would once again present unmanageable difficulties for the U.S. Treasury Dept because of the Eminent Domain Clause.

“As long as nobody asks me whether we are off the gold standard….that is all right, because nobody knows what the *&#* gold standard really is.”

–F.D. Roosevelt: March 8, 1933

With the stroke of a pen, President Roosevelt not only wiped out the value of the savings of many people, (who had at least been fortunate enough to get their money out of the banking system before it, too. collapsed) he effectively wiped out 59% of the government’s debt at the very moment he increased the value of the government’ supply of gold. ANOTHER PERFECTCRIME!

If you wish to own gold it would be wise to purchase it in the form of pre-1933 or Commemorative U.S. gold coins with a variety of dates, denominations and mint marks which could exclude them from any possible future gold confiscation. Gold British Sovereigns and Gold Francs are also protected under this law and good to own. The only individuals who watched the value of their assets increase by 59% when Roosevelt devalued the U.S. dollar were the people who owned gold coins having a recognized special value to collectors of rare and unusual coins.” In effect, individuals owning collector gold coins made a bundle.

Who were these people? Over the decades, many have alleged it was the super-rich, the elite, the inside members of the establishment. Is this true? Probably. The Rockefellers, The Mellons, and so forth, certainly benefited handsomely during the desperate times of the Great Depression. But isn’t that the way it always is? Politicians cater to the powerful who feather the nests the politicians who pass laws to protect the interests of the powerful.

Next came the confiscation of silver. On August 9, 1934, Roosevelt issued a Presidential Proclamation ordering all silver bullion be surrendered to the U.S. Treasury within 90 days. A 50% tax was also levied on all profits realized from the sale of silver. People were paid 50.1 cents per ounce.

From 1933 to 1971, the U.S. dollar was pegged to gold, with gold remaining at a fixed price of $35.00 per ounce. On August 15, 1971, after heavy gold buying by foreigners had drained billions of dollars worth of gold out of the U.S. Treasury at the price of only $35 an ounce, President Nixon “closed the gold window.” From that moment on not one single currency in the world was redeemable in gold.

Following in Roosevelt’s footsteps, Nixon saw an opportunity to liquidate more governmental debt by taking the dollar off the gold standard. Naturally he seized the opportunity, and in December 1971, he increased the official price of gold from $35.00 per ounce to $38.00 per ounce. This same phenomenon occurred again on February 12, 1973, when the U.S. dollar was devalued again for a third time with the official price of gold being increased to $42.22 per ounce.

For many decades now Americans have been allowed to own gold and silver. Although the “official” price of gold is still $42.22 per ounce, today the market price hovers around

$1006.10* per ounce while silver fluctuates around $16.77** per ounce. (The price of gold and silver peaked in 1980 at around $850.00 and $49.00 respectively. These price peaks came with the end of the inflationary phase of the long-term economic cycle.)

All holders of gold bullion coin should take the “official” price of $42.22 per 1oz very seriously when accumulating gold for protection. They could be setting themselves up for a hard lesson in how our government may treat that bullion in the future.

If you think this cannot happen read this:

In 1979 The Franklin Mint shipped a substantial number of Krugerrands on TWA. The shipment was lost by TWA, so the Franklin Mint sued to recover its loss at the actual market price of gold. In Franklin Mint Corp. vs. Trans World Airlines, the Supreme Court ruled that gold bullion values in commerce are limited to $42.22 an ounce. That’s all they received!

That means all confiscated gold could possibly be compensated at only $42.22 per 1oz. and not at the world market price. Don’t take this decision lightly. It was another blatant warning that the government may be contemplating grand larceny—AGAIN.

The United States has seen four different gold confiscations—the last of which was in 1933. Few people realize that when the freedom to own gold was restored in 1972, the president retained the power to require us to surrender our gold which he can do again any time (probably on a Friday) with the mere stroke of a pen.This is one reason why there are the reporting requirements for bullion transactions which, of course, don’t exist for so-called “collector” gold. Thus, “collector” coins provide your portfolio with the diversification you’ll need to protect yourself from a truly different kind of risk. Since 1979, the U.S. and world economies have, in real terms, been contracting. Using the value of the dollar as it stood in 1940, the Gross Domestic Product today is less than it was in 1940.

How can this be? The purchasing power of today’s dollar is worth just two cents when compared to the dollar of 1940!

The government continues to devalue your dollar by increasing the supply of dollars available to enable everyone to borrow way into prosperity without increasing interest rates. Another grand illusion not seen (in America) since the infamous Roaring 20’s. Of course, we know what the debt binge of the 20’s brought: a soaring stock market, mushrooming debt in both the public and private sectors, and an eventual crash and subsequent Great Depression.

Today Americans (and all the other people of the world) find themselves standing right back in the same shoes of their forefathers. The stock market (after soaring on lower interest rates and then on borrowed money) is in serious trouble. More people are losing faith in the stability of the world’s paper currency system! (*1)

HISTORY REPEATS ITSELF

In 1982, as interest rates, crude oil, and commodities were finally declining from cyclical highs, investors were bailing out of mutual funds at a record rate, and convinced that stocks were “stupid” they had lost three-quarters of their real value in the previous 16 years Money surged into bank CDs, money markets, and hard assets. Today, as interest rates, crude oil, and commodities are finally rising from cyclical lows, investors are pouring into mutual funds at a record rate, convinced that stocks are “the place to be.” Money is surging out of banks CDs, money markets, and hard assets. Investors are truly inveterate followers of the thundering herd. Assuming that profits and dividends continue to grow at the same average rate that they have grown for the past thirty years, or even one hundred years, the stock market will decline by 82% by thy next bear market bottom assuming that the dividend yield at that point 7.5%, its historic average for a bottom. Since high tops are usually followed by low bottoms, a prediction of a 90% drop is probably too conservative. It has been a wild party, and the stock market a most gracious and generous host, but it’s time to go home before you are trampled by the herd rushing to leave. (*2)

Prolog: This article was written In August 2008 5 months prior to last September. Since then the economy is in a critical situation and many have lost more than 40% of their worth. They are projecting a second dip in this current recession and that is predicted to happen sometime by the end of the first quarter on next year. The markets will appear to level off until then and may show a slight upward tick. But with all the Billions of dollars the government has printed and bail outs etc… It will come into play soon and our economy will hit brick wall unlike any other seen. China is buying gold and silver like it is going out of style and for the exact same reason you should be buying gold and silver. To protect your wealth. China knows there is a good chance that the almost Trillion dollars it holds in American debt maybe become worthless and the only way to hedge their bet is buy using that money to buy gold and silver. Exactly what you should be doing right now be for the demand out ways the supply.

As an example: if you have let us say $100,000 is paper liquid assets then you should have $15,000 to $30,000 in precious metals. If you have $10,000 then 30% of that. You get the idea. You when you buy gold and or silver I highly advise you take physical possession of the gold and silver so you have control in case there is a bank holiday or economic collapse. Precious metals are your insurance on your money, your wealth and have been that way for over 5,000 years. You have insurance on your car and home and gold and silver is your insurance on your money. But unlike insurance on your car or home where you cannot get all those years of premiums back, you can cash in your gold and silver and done at the right time you could me ahead of where you started.

One Last thing about China. China has just started a program to encourage its citizens to every payday to buy some gold or silver. China knows that gold and silver are hard solid assets and is trying to make sure its citizens and the wealth they are building is sound and secure. You do not hear our government giving us that good advice. And if just 10% of China’s 1.3 Billion citizens do this the demand for gold and silver will skyrocket and that means so will the cost of gold and silver.

I highly recommend you seriously consider getting more information about buying gold and silver very soon to protect what you have right now before you lose more. And remember you really are just converting a % of your paper money into to something that will hold its value and can go up in value in these economic times.

If you have any questions about owning gold and silver and what is right for your particular situation please feel free to call. It cost you nothing. I can be reached at Colonial Resources; we are out of Minneapolis Minnesota. My name is Terry Sachetti and I am a Sr. Precious Metals Advisor. I would be happy to talk to you and send out information if you like. 763-219-8895 please let me be of help to you.

We are in unchartered waters with this current economic crises and your future depends on you informing yourself on how you can preserve what you have today from what may happen tomorrow. 5,000 years have proven this method works.

Your freedom to own and retain gold bullion in this country is a relatively new one. U.S. citizens were given this temporary freedom in 1975. It had been taken away in 1933.

Your government will remind you that this is a temporary freedom. It is a revocable privilege, not a basic right, as already demonstrated four times in American history. (Gold was confiscated under F.D.R. in 1933, under President Lincoln in the civil War and twice prior to the signing of the Constitution.)

The laws of gold confiscation are very clear: During any time of national crisis, it becomes illegal to buy, sell, or “hoard” gold bullion in any form. It is delineated under an Executive Order and can be re-administered as quickly as the assets in your checking account can be frozen. The penalties for violation are 10 years in prison, $10,000 fine, or both. Now some would say that it would not happen again but really have you not been surprised at some of the things you thought you would never see be done in this current government?

Few would argue that we are rapidly headed for, if not already in, a national crisis. And the experts are calling for a second dip recession which means the second shoe has yet to fall on us and they say it will be worse than the first. Each month the balance of trade deficit gets worse, while the national debt continues to grow. More and more Asian countries are falling into a major world recession — the once mighty China being the latest. All most 3 million high paying jobs this year alone have been lost and not replaced at companies like GM, Ford, IBM, Sears, McDonald Douglas, Honeywell, Boeing and others, while personal bankruptcies continue to be filed in record numbers.

The FDIC is self-admittedly broke and today could not even repay 10-cents on the dollar, plus we are told that over 1000 banks are operating at dangerous levels — less liquid than many banks which closed right after the crash of 1929. The number of Banks closings is already well ahead of 1929 levels and rising.

Behind it all, our lawmakers have been busy spending BILLIONS and now Trillions a year, which we do not have. They call it “deficit spending.” You might call it robbery”.

At this pace it is obvious we are in a full blown, old fashioned national crisis, the kind where hard working people have lost over 40% or more of their wealth and are about to lose the rest of their entire life savings if action is not taken now. When it hits, Uncle Sam will not be able to worry about you or your life savings.

Uncle Sam will be in a panic to get his books balanced to continue foreign trade and more borrowing if anyone will borrow us anymore. How could the books get balanced in a hurry? Fairly simple: by collected and increasing all available valuable assets, and having them reappraised upward.

Need an example? How about 1933 — under F.D.R. gold was confiscated and gathered at $20.57 an ounce. Once collected, the U.S. government graduated the price of gold up to $35, an increase of approximately 70%.

They say those who are not students of history are doomed to repeat it. Don’t get caught with your Krugerrands, Maple Leafs, Pandas, Pesos or other bullion coins when the hammer falls.

The only problem is no one knows the exact day the hammer will fall. Maybe that’s why some folks say that bullion coins should be sold with a good crystal ball and a rabbit’s foot.

Those holding bullion should remember the government considers your freedom to do so a privilege and not a right. And the reason you hold gold is to be safe from any emergency or crisis, especially a national crisis. So what should you do?

Strategy: Convert a portion of your assets (a minimum of 25% to 30%) into a form that has withstood both U.S. Supreme Court and the Treasury Department scrutiny. Buy only pre-1933 or commemorative U.S. Gold Coins. British Sovereigns and Francs are also safe to own. Silver Dollars are collectibles and safe to own, but junk silver is considered bullion. Since they are classed as collectibles you will enjoy several privacy and tax advantages not possible with bullion. There is also a proven wealth building potential due to increasing demand and diminishing supply. Bullion in any form is clearly subject to confiscation. Confiscation is more than just a possibility -it is a reality as a “bust” cycle nears. Do not buy more bullion than you can afford to lose.

Let’s face it, in these economic times the only people who will be able to protect what they have left are the people holding a percentage of their assets in the right kind or precious metals. If you have $10,000 in Cash a put it in your top dresser drawer and $10,000 in precious metals in your bottom dresser drawer, which one would be worth more in the next 24 months? That’s right, your $10,000 cash would have much lower buying power, meaning it would not really be worth $10,000 and the $10,000 in precious metals would be worth much more, hence making up for what you lost in buying power in the paper money and most likely you would be ahead. Then that is why you need to protect what you have left as soon as you can with Gold and Silver.

One more way to look at it is, when buying precious metals to protect your assets, you are simply converting a percentage of your paper assets into precious metals, which will rise in value as the paper money decreases in value, therefore insuring your present wealth or assets are protected and you may have a gain on top of that. At some point when things stabilize you just convert your precious metals back to paper.

If you have any questions and would like some free advice call us any time at Colonial Resources. Ask for Terry Sachetti, Sr. Advisor, 1-763-219-8895 It is good to know that Colonial Resources does not just sell gold and silver but also trades and buys gold and silver and keeps our clients informed on what the market is doing and when it the best time to buy and sell. We also do not hold your gold and silver as we believe strongly that you should have physical possession of your metals at all times so you are in full control.

The crises deepen. What crises you ask? Starting about sixty years ago, we began to accelerate in our usage of silver for industrial purposes. As the great industrial complex known as America grew, so did it’s appetite for silver and other industrial metals. In fact, it grew at such a pace that we devoured the above ground stockpile of silver at such a rate that it is now gone. That’s right, what took the entire world over five thousand years to acquire, was used up in just six decades, and the above ground stockpile has been completely eliminated. Silver is now rarer than gold! In fact, silver will be from this point forth, for all of eternity, rarer than gold. From this point forth, we work from current silver production alone. And, from this point forth, demand will outstrip production without exception.

Silver differs from gold in several important ways. Most notably is that unlike gold, silver gets used up and is then gone forever. Almost all of the gold ever mined in mankind’s history is still here. We don’t really use gold for anything other than money or as a store of wealth and for decoration like jewelry. Silver gets used in all kinds of industries. It’s natural antibiotic properties make it a wonderful instrument in the medical field. It is used in Military applications; it’s used in all kinds of electrical switches, relays, and batteries. It’s used in water purification systems and paints, and as a primary component in the photographic industry. Silver doesn’t corrode and has excellent thermal conductive properties. Silver, like gold, has also been used as a monetary instrument for over fifty straight centuries. Moreover, as India and China continue their unparalleled advance into joining the ranks of the industrialized world, the situation will be further exacerbated.

As if that’s not enough of a problem, the plot thickens!Silver is now being rediscovered as an investment vehicle. Perhaps most recently, and for sure most notably in Barclay’s new silver Exchange Traded Fund. Barclay’s ETF has recently pulled an incredible amount of silver off of the market. Barclay’s ETF required Barclay’s Global Investors to possess upwards of one hundred and thirty million ounces of silver prior to the approval of the fund in anticipation of investor demand of the ETF. The problem was that the COMEX division of NYMEX only had one hundred and seventeen million ounces of silver totally in all warehouse stock categories combined.

To make matters even worse, COMEX market participants through possession of one hundred and forty thousand silver future contracts at five thousand ounces each already have claims of up to seven hundred million ounces of silver that may not even exist. Barclay’s has acquired approximately one hundred million ounces of silver and counting.

Why can’t we just mine more silver? The reason we cannot “fix” the problem by mining more silver is the cost. Today for example, to mine gold, it takes on average around three hundred and fifty dollars to mine, refine, and bring to market one ounce of the yellow metal. With gold trading around Nine hundred and Fifty dollars an ounce, that is a profitable endeavor. Silver however, is mined as a by-product. In order to mine one ounce of silver as a primary metal, the cost associated would be similar to the cost of mining one ounce of gold or approximately three hundred and fifty dollars. The issue is that silver is trading around thirteen dollars an ounce and would not even be close to profitable when the mining costs are factored in. Currently we mine around six hundred million ounces of silver each year while industry consumes about eight hundred and seventy million ounces. Can you see a disparity developing? The market is tightening.

Historically, the silver to gold ratio has been fifteen to one. It would typically take fifteen ounces of silver to buy one ounce of gold. Today, with silver trading at approximately thirteen dollars an ounce and gold at around Nine hundred Fifty dollars an ounce, it takes closer to Seventy Five ounces of silver to buy one ounce of gold. This suggests an obvious opportunity as once this ratio is corrected, we can expect silver approaching a price of at least forty dollars an ounce. Most analysts are suggesting a price between sixty dollars and one hundred and twenty dollars an ounce. Although this analyst tends to remain conservative in his predictions, it’s not at all unrealistic to expect such profits when you consider the cost we now must face in order to mine silver as a primary metal.

Remember, never again will gold be rarer than silver. Opportunities like these come once in a lifetime. I’d suggest you begin to acquire as much silver as your current situation will allow, and to my own clients, I recommend a position in circulated silver dollars that are held by you in your physical possession. Circulated silver dollars trade without any dealer reporting requirements, so they can be bought and sold privately. They are easily recognizable by just about every American, and they offer a good amount of silver in an affordable, liquid, and portable form. Industry will continue to use and need silver in ever increasing amounts. The only question that remains is how much money you will sell it to them for! These coins are becoming harder and harder to acquire in any quantities and based upon the worsening silver shortage they may eventually become impossible to acquire at all. Oh and with this current economic situation and the printing of money out of thin air Silver only has one way to go and that is up.

If you have lost money in the markets, if you are looking for precious metals to hedge against inflation, if you are looking for a great precious metal for bartering Silver is a fantastic buy. Bags of Silver Dollars are ranging from $18,000 to $19,500 as of today and if the experts are right Silver may go as high as $50 to $89 dollars an oz. That means a bag of silver could be worth between $50,000 to $89,000 per bag and that could help you make up some of what you have lost, and is certainly a great hedge against inflation, and would give you huge bartering power. Now I am not saying you should not buy gold as it is also important to own. I just feel everyone one should have some silver and if you can, I would suggest buying at least 2 bags. If that is out of your range then you should be buying rolls of silver dollars as you can.

Call my office, Colonial Resources and talk to my assistant, Terry Sachetti, a Sr. Analyst at 1-763-219-8895 and he will be more than happy to answer any questions you may have about Silver and Gold.

Colonial Resources Inc. is a precious metals firm based in Edina, Minnesota. After becoming familiar with the practices of many major precious metals firms we decided it was necessary to offer an alternative to individuals with interests in precious metals ownership. We believe in the fundamental philosophies that if you ... Continue reading →

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